No move expected on key rates

PRICE PRESSURES:：The central bank is expected to keep its key interest rates on hold this month, but inflationary pressures may prompt it to act next year, analysts said

Staff writer, with CNA

Sat, Sep 14, 2013 - Page 14

Several foreign banks said yesterday that they expect the local central bank to leave key interest rates unchanged during the upcoming quarterly policymaking meeting scheduled for Sept. 26.

Among the foreign banks, ANZ Group Ltd said that as Taiwan’s economy is growing at only a mild pace, the central bank is expected to maintain ample liquidity in the market to give the economy a boost.

ANZ added that it is unlikely for the central bank to tighten its monetary policy during its next policymaking meeting.

Last month, the government cut its forecast for economic growth for this year to 2.31 percent from an earlier estimate of 2.40 percent, citing slower investment and weaker exports.

At its last policymaking meeting in late June, the central bank said interest rates would remain unchanged, maintaining the discount rate of 1.875 percent, the rate of accommodations with collateral at 2.25 percent and the rate of accommodations without collateral at 4.125 percent.

It was the eighth consecutive quarter during which the central bank reiterated its key interest rates.

Tony Phoo (符銘財), chief economist at Standard Chartered Bank Taiwan, also agreed, pointing out that in addition to slow economic growth, Taiwan is facing a few inflationary threats, and because of these factors he does not anticipate the central bank will tighten monetary supply at the upcoming meeting.

Taiwan’s consumer price index (CPI) fell for the first time in more than three years last month due to a relatively high comparison base during the same period last year. The CPI was down 0.79 percent year-on-year last month and CPI growth averaged only 0.87 percent during the first half of the year.

However, Phoo said that as the government has decided to raise domestic electricity rates by 8.49 percent from Oct. 1 and Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) is scheduled to increase fares by 7.1 percent and 9.6 percent from Oct. 8, the nation’s consumer prices are expected to face upward pressure.

He added that Taiwan would see heavier inflationary pressures in the future, which might prompt the central bank to start raising its key interest rates during the first quarter of next year at the earliest.